Mortgage brokers are now involved in more than 70% of residential home loans in Australia. With such widespread use, it’s only natural to wonder: how do mortgage brokers get paid? And more importantly, is there any cost to the borrower?
This article will give you a detailed breakdown of how mortgage brokers earn their income, the difference between upfront and trail commissions, when fees may apply, and what regulations are in place to ensure full transparency. Whether you’re a first home buyer or looking to refinance, understanding broker remuneration helps you make an informed decision.
Why Understanding Broker Payment Matters
1. Making an Informed Financial Decision
Knowing how your mortgage broker earns their money ensures you understand what (if anything) you’re paying for and how that might influence the advice you receive.
2. Choosing the Right Broker
The best mortgage brokers are transparent about their commission structure and explain it clearly to their clients. Transparency builds trust, especially in a transaction as significant as a mortgage.
3. Ensuring Independent Advice
When you know how brokers are paid, you’re better equipped to identify if they’re recommending loans based on your needs—or their incentives.
✅ Tip: Always ask your broker to disclose how they’re paid, and whether they receive different commissions from different lenders.
How Do Mortgage Brokers Get Paid in Australia?
Lender-Paid Commissions (Standard Model)
The most common way mortgage brokers earn money in Australia is through lender-paid commissions. This means the bank or lender—not you—pays the broker a commission for introducing your business to them.
There are two main types of commission:
1. Upfront Commission
Paid once your loan settles. It’s a one-time payment calculated as a percentage of the total loan amount.
2. Trail Commission
An ongoing monthly payment based on the balance of your home loan. This continues for as long as your loan is active and paid on time.
Example: On a $500,000 loan, a broker might earn:
- Upfront Commission: $3,250 (based on 0.65%)
- Trail Commission: $750–$1,200 per year (based on loan balance and trail rate)
What Are the Typical Mortgage Broker Commissions in Australia?
Upfront Commission
- Typically ranges from 0.55% to 0.77% of the loan amount
- Paid once the loan is settled
- Calculated on the total amount borrowed
Example:
- Loan amount: $600,000
- Upfront rate: 0.65%
- Commission: $3,900 (paid by the lender, not the borrower)
Trail Commission
- Generally ranges from 0.15% to 0.275% per annum
- Calculated monthly on the outstanding loan balance
- Designed to reward brokers for helping maintain a performing loan over time
Example:
- Year 1 loan balance: $590,000
- Trail rate: 0.20%
- Annual trail: $1,180 (paid in monthly instalments)
Commission Structures Vary
Each lender has its own commission structure. A good broker doesn’t let commission influence their recommendation—and legally, they must disclose these details to you.
Do Mortgage Brokers Charge Fees to the Borrower?
In most cases, no. The broker is paid by the lender, and there’s no out-of-pocket expense for the borrower.
When Might a Broker Charge a Fee?
There are exceptions:
- Very small loan amounts (e.g., under $150,000)
- Non-conforming loans or specialty lending (e.g., bad credit, self-employed with no docs)
- Private lenders who don’t offer commissions
In these cases, the broker must disclose the fee upfront and in writing.
Legal Requirement for Fee Disclosure
Under the National Consumer Credit Protection Act (NCCP), mortgage brokers are required to:
- Provide a Credit Guide outlining their services
- Issue a Credit Proposal Disclosure Document, which details commissions and any fees charged
✅ Always ask your broker: “Do you charge a fee for your services?”
Mortgage Broker Transparency and Legal Obligations
Best Interests Duty
As of January 2021, mortgage brokers are legally required to act in the best interests of the borrower. This means they must:
- Prioritise your needs over lender commissions
- Recommend the most suitable loan for you
- Justify why that recommendation is in your best interest
Required Documents and Disclosures
- Credit Guide: Overview of services, affiliations, and dispute resolution process
- Quote or Credit Proposal: Commission amounts and potential conflicts of interest
- Final Credit Assistance Document: A summary of the recommended loan and why it suits your situation
Avoiding Conflicts of Interest
The law prohibits brokers from recommending loans solely based on commission incentives. Brokers must be able to justify their recommendation with a documented comparison.
🛑 Red Flag: If your broker refuses to disclose commission information or only offers one or two lenders, consider this a warning sign.
How Brokers Earn Money vs How Banks Earn Money
Mortgage Brokers
- Independent of any one lender
- Paid by the lender for bringing in business
- Must act in the borrower’s best interest
Bank Loan Officers
- Paid by the bank to sell in-house loan products
- Not legally obligated to act in the borrower’s best interest
| Criteria | Mortgage Broker | Bank Lender |
|---|---|---|
| Access to Multiple Lenders | ✅ Yes (20–40 lenders) | ❌ No (only in-house loans) |
| Commission Transparency | ✅ Disclosed in writing | ❌ Not required to disclose |
| Best Interests Duty | ✅ Legally required | ❌ Not applicable |
| Cost to Borrower | ✅ Usually free | ✅ Usually free |
Upfront vs Trail Commission Explained
Upfront Commission
- One-time payment based on the loan amount
- Encourages brokers to win new business
- Can lead to “loan churn” if brokers refinance clients unnecessarily
Trail Commission
- Ongoing payment over the life of the loan
- Encourages brokers to provide ongoing support
- Aligns broker’s success with your satisfaction
Which Model is Better?
While upfront commission helps brokers manage cash flow, trail commission:
- Encourages long-term client relationships
- Rewards brokers who place clients in sustainable loans
- Discourages unnecessary refinancing
🔍 Some lenders now offer loans with no trail and higher upfront, or low upfront and high trail—your broker should explain which applies to your loan.
Why Working With a Broker Is Still a Smart Move
Despite earning commissions, mortgage brokers offer value that banks often can’t match:
✅ You Get More Loan Options
Most brokers have access to 20–40 lenders and hundreds of loan products.
✅ You Don’t Usually Pay for the Service
Lenders pay the broker—you get expert help without the cost.
✅ You Avoid Expensive Mistakes
Brokers know lender policies inside-out and help you avoid rejections, fees, or the wrong loan structure.
✅ They’re Legally on Your Side
The Best Interests Duty ensures your needs are the broker’s top priority.
Questions to Ask Your Mortgage Broker About Their Pay
To ensure transparency, ask:
- Do you charge me any fees for your service?
- How are you paid?
- Do different lenders pay you different commissions?
- Will you show me your commission in writing?
- How do you decide which lender and loan is right for me?
FAQs – Real Questions From Borrowers
Do mortgage brokers charge a fee in Australia?
Most do not. Brokers are generally paid by the lender via commission. Fees may apply for complex loans or small loan sizes but must be disclosed.
Are brokers paid more if I borrow more?
Yes. Commissions are based on loan size, so larger loans pay more. However, brokers are bound by law to recommend the most suitable loan, not the most profitable one.
Do all brokers get paid the same by every lender?
No. Commission rates can vary slightly between lenders. A good broker will prioritise the right loan for your needs, not the highest-paying one.
Can a broker’s commission affect which loan I’m offered?
It shouldn’t. Under the Best Interests Duty, brokers must justify their recommendation based on your needs—not commission.
Are brokers legally required to disclose their commission?
Yes. You should receive a written disclosure outlining the commission and any fees payable.
Conclusion
Understanding how mortgage brokers get paid in Australia is key to building trust and making confident financial decisions. Most brokers are paid by lenders through upfront and trail commissions, and the vast majority of Australians will never pay a fee for using one.
What matters most is working with a broker who is transparent, accredited, and legally obligated to put your interests first. Asking the right questions and choosing a broker through a trusted directory—like Finistry—can help ensure your broker relationship is based on integrity and value.
💡 Looking for a broker who’s transparent and works in your best interest?
Find a trusted mortgage broker near you at Finistry.com.au—Australia’s directory for finance professionals.
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